Growing grocer

Jenny Strasburg, OF THE EXAMINER STAFF

Published 4:00 am, Friday, January 28, 2000

Safeway Inc. will spend millions modernizing and expanding its California supermarkets this year as part of a ramped-up $1.6 billion in capital investments nationwide, company officials announced Thursday along with a strong earnings report for 1999.

The Pleasanton-based company this year will expand Bay Area supermarkets in San Jose, Fremont, San Anselmo and Palo Alto. Safeway also will add or remodel specialty departments - fresh fish, deli, bakery, floral and other areas - in many of San Francisco's 14 Safeways, spokesman Brian Dowling said.

"Nothing dramatic" will be the approach to updating The City's Safeways, according to Melissa Plaisance, the company's senior vice president of finance.

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"Our offering isn't changing in the Bay Area," she said, adding that Safeway will continue successful programs such as its popular Club Card. The card provides discounts to shoppers who present it at the checkout and also gives the company a rich store of marketing information.

Safeway expects to build 70 to 75 new stores nationally in 2000 - including stores in Modesto and Santa Rosa - but no new stores are planned this year in The City, Dowling said.

"We're looking at some new sites in San Francisco, but nothing I can share with you," he said.

Safeway said its 1999 earnings rose 20 percent to $970.9 million ($1.88 per share) from $806.7 million ($1.59 per share) in 1998. Sales increased during the 12 months by 18 percent to $28.9 billion from $24.5 billion in 1998.

The company said it earned $305.3 million in the fourth quarter compared with $255 million for the same period a year earlier. It reported fourth-quarter sales of $9.9 billion compared with $7.9 billion a year earlier.

Investors responded positively Thursday, pushing Safeway shares up $4.25 to $35.75 on the New York Stock Exchange.

That compared with a less-than-stellar performance for investors in 1999; Safeway ended the year at $35.75 - the same price as Thursday's close - down 41.3 per cent for the year.

Last year brought Safeway heightened competitive pressure from Boise, Idaho-based Albertson's, which increased its holdings by acquiring Salt Lake City-based American Stores Co., the parent company of Lucky supermarkets.

In doing so, Albertson's created a company with more than 2,400 stores nationwide, compared with Safeway's 1,659 stores in the United States and Canada.

Albertson's officials said the company is building five new stores in the Sacramento-Bay Area in 2000, including one opening next week in Livermore. New stores under construction in Pleasant Hill, Concord and Pittsburg are all scheduled to open by July, said Judie Decker, Albertson's spokesperson for California.

In San Francisco, where Albertson's currently has just two stores, both of which previously carried the Lucky name, the company plans to build two new stores as early as 2001, Decker said.

"It's not always easy to find suitable sites," she said - an understatement given The City's slim options for large real estate tracts. "But Albertson's has some different formats that may be more workable for us than what we had in the past."

The new San Francisco stores probably will be smaller neighborhood stores with less parking, Decker said.

Safeway's local competition also includes Kroger Co., which operates 32 Bay Area stores in its Ralphs division.

Those include 12 San Francisco supermarkets under various brand names: three Bell Markets, seven Cala Foods and two FoodsCo Warehouse stores, said Terry O'Neil, Ralphs spokesman for California.

Several major acquisitions contributed to Safeway's income growth. In November 1998, the company bought Dominick's, the second-largest supermarket operator in Chicago. And in 1999, Safeway added Carrs and Randall's supermarkets to its holdings.

Perhaps more promising than the rise in net income, though, was the growth in identical-store sales - a category that tracks individual store performance, leaving new stores out of the picture. Identical-store sales increased 2.9 percent over fourth quarter, 1998.

"Some of that is Y2K stock-

up," said industry analyst Michael J. Shea with D.A. Davidson & Co. in Portland. "But even stripping that out, they were up 2 percent."

Wide-ranging competitive pricing and aggressive marketing in the industry earlier in 1999 hurt Safeway's overall earnings, but the company showed strength in bouncing back, Shea said.